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Friday, March 1, 2024
The Observer

Examining the 77-cent myth

For every dollar men make, women only make 77 cents. It’s one of the best-known and most repeated statistics I know of, and last week we heard it again in the middle of President Obama’s annual State of the Union Address as he reiterated his support for equal pay for equal work. It’s a statistic meant to outline the extent of gender discrimination in the workplace today. There’s just one problem. It’s an outrageously misleading comparison, almost to the point of being untrue.

First, the actual fact. Yes, according to the U.S. Census Bureau, the 2012 ratio of median earnings between full-time working women and men was roughly 77 percent. But what does this actually tell us? A lot less than you’d expect. This compares the salaries that all women receive to the salaries that all men receive, with no consideration at all of an individual’s education, work experience, occupation, hours worked or basically anything else. That makes a big difference.

Let’s start with hours worked per week. The Department of Labor defines full-time work as more than 35 hours per week, but there’s a lot of variation among full-time workers, and women are more likely to work fewer hours (or work part-time). Restricting a comparison of men and women to those working forty hours a week is enough to reduce the gap to 87 cents (incidentally, women working part-time made 110 percent of what men did).

But this still doesn’t give you an apples-to-apples comparison. To do that, you need to control for those other factors that affect salary, including education, work experience, firm tenure, industry and occupation. Women are more likely to leave the workforce for extended periods of time (often to start a family) and also tend to choose entrance into lower-paying fields — ignoring this biases your conclusions. Former Congressional Budget Office Director and Baruch College economist June O’Neill did just that in one of the best-known studies on the gap, and she found that women actually make between 91 and 98 cents for every dollar men do.

A similar study from economists at Stanford found similar results. Some work has even suggested that some of this two-to-nine cent gap isn’t the work of discrimination. Rather, it’s a result of things like women being more risk-averse and less aggressive in asking for raises or bargaining over salary.

To be clear, I’m not saying discrimination doesn’t exist, or that women making two percent less then men somehow means we don’t still have a problem. But for me, the really important thing is this: focusing on the 77 cent figure instead of looking at the underlying analysis of this topic hides the actual issues we should be concerned about with respect to gender equality and the workplace.

For instance, women tend to enter into lower-paying occupations, as I mentioned. High-paying industries like finance and engineering tend to be male-dominated, while workers in sectors such as education or nursing are disproportionately female. Some of this probably has to do with personal preference, but some is likely not. Are there barriers of entry into these fields for women? Are our government’s childcare and family leave policies inadequate for encouraging women to enter into higher-paying fields instead of those offering more flexibility? And why are women more risk-averse than men in the workplace? These are all key questions in considering the gender pay gap, but they’re also the questions that get ignored when we focus on the 77-cent number and the topic of equal pay for equal work.

One of the most interesting studies about gender relations I have read comes from behavioral economists Uri Gneezy and John List in their new book “The Why Axis.” The two ran a set of experiments to study differences between men and women in several diverse cultures with differing attitudes on gender. They discovered that much of the difference between men and women with respect to competitiveness or risk aversion is a result of cultural upbringing, not innate difference. Given that, one of the keys to erasing the gender gap rests not with the government, but with the family. Fostering self-confidence and exposure to competitive environments at a young age is crucial in bringing about professional success later in life. Moreover, rather than crafting yet another law prohibiting legal discrimination, government resources would be far more effective if devoted to programs that boost such efforts for girls of a young age. Of course, if you’d rather, we could just keep talking about how women only make 77 cents.

In the age of Twitter and the 24-hour news cycle, it’s become the norm to distill all of our ideas and beliefs into as few words as possible. But the world we live in is complex, and so are the issues we’re facing. To have any hope of focusing on real problems, we need to think beyond the first 10 words of any issue and get at the deeper analysis. The 77-cent statistic is a perfect example why.

The views expressed in this column are those of the author and not necessarily those of The Observer.